Question 1
The starting point of many methods for predicting equilibrium strategy in sequential games is
Answer
designing proactive reactions to rival actions
information sets
uncertain outcomes
backwards induction based on an explicit order of play
endgame analysis
Question 2
When there is an Equilibrium (or a Nash Equilibrium), we expect that:
Answer
once the firm's get there, no one will change their strategy.
firms will tend to select a randomized strategy.
neither firm will care what it does.
this is always a dominated strategy.
Question 3
An illustration of a non-credible commitment is the promise
Answer
to not increase capacity in a declining industry
to match a new entrant's discount price
to enter a profitable industry
to restrain output to the quota assigned by a cartel
to exit in the face of projected losses.
Question 4
To trust a potential cooperator until the first defection and then never cooperate thereafter is
Answer
a dominant strategy
an irrational strategy
a grim trigger strategy
a non-cooperative finite game strategy
a subgame imperfect strategy
Question 5
The difference between cooperative and non-cooperative games is
Answer
cooperative games allow side payments to support collusion
non-cooperative games encourage communication of sensitive information between arms-length competitors
cooperative games involve randomized behavior
cooperative games necessitate an explicit order of play
inconsequential except when players have contractual relationships
Question 6
Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when:
Answer
the preference rankings of vacationers travelling together are negatively correlated.
a preference for cities is always higher than preferences for mountain vistas.
preference rankings of vacationers travelling together are positively correlated.
preference for the seaside is always higher than preferences for city excursions.
Question 7
Which of the following pricing policies best identifies when a product should be expanded, maintained, or discontinued?
Answer
full-cost pricing policy
target-pricing policy
marginal-pricing policy
market-share pricing policy
markup pricing policy
Question 8
____ is a new product pricing strategy which results in a high initial product price. This price is reduced over time as demand at the higher price is satisfied.
Answer
Prestige pricing
Price lining
Skimming
Incremental pricing
Question 9
Electricity pricing that varies in its billing expense throughout the day is called
Answer
full pricing
marginal cost pricing
dynamic pricing
variable pricing
full cost pricing pricing
Question 10
The following are possible examples of price discrimination, EXCEPT:
Answer
prices in export markets are lower than for identical products in the domestic market.
senior citizens pay lower fares on public transportation than younger people at the same time.
a product sells at a higher price at location A than at location B, because transportation costs are higher from the factory to A.
subscription prices for a professional journal are higher when bought by a library than when bought by an individual.
Question 11
Which of the following is not among the functions of contract?
Answer
to provide incentives for efficient reliance
to reduce transaction costs
to discourage the development of asymmetric information
to provide risk allocation mechanisms
Question 12
When someone contracts to do a task but fails to put full effort into the performance of an agreement, yet the lack of effort is not independently verifiable, this lack of effort constitutes a
Answer
breach of contractual obligations
denial of good guarantee
loss of reputation
moral hazard
Question 13
Which of the following are not approaches to resolving the principal-agent problem?
Answer
ex ante incentive alignment
deferred stock options
ex post governance mechanism
straight salary contracts
monitoring by independent outside directors
Question 14
To accomplish its purpose a linear profit-sharing contract must
Answer
induce the employee to moonlight
communicate a code of conduct that will be monitored and enforced
meet either the participation or the incentive compatibility constraint
establish a separating equilibrium
not realign incentives
Question 15
When retail bicycle dealers advertise and perform warranty repairs but do not deliver the personal selling message that Schwinn has designed as part of the marketing plan but cannot observe at less than prohibitive cost, the manufacturer has encountered a problem of ____.
Answer
reliance relationships
uncertainty
moral hazard
creative ingenuity
insurance reliance
Question 16
The antitrust laws regulate all of the following business decisions except ____.
Answer
collusion
mergers
monopolistic practices
price discrimination
wage levels
Question 17
The sentiment for increased deregulation in the late 1970's and early 1980's has been felt most significantly in the price regulation of
Answer
coal
grain
transportation
automobiles
electric power generation
Question 18
The ____ is equal to the some of the squares of the market shares of all the firms in an industry.
Answer
market concentration ratio
Herfindahl-Hirschman index
correlation coefficient
standard deviation of concentration
Question 19
The Herfindahl-Hirschman index (also shortened to just the Herfindahl index) is a measure of ____.
Answer
market concentration
income distribution
technological progressiveness
price discrimination
Question 20
____ occurs whenever a third party receives or bears costs arising from an economic transaction in which the individual (or group) is not a direct participant.
Answer
Pecuniary benefits and costs
Externalities
Intangibles
Monopoly costs and benefits
Question 21
All of the following except ____ are shortcomings of cost-benefit analysis.
Answer
difficulty in measuring third-party costs
difficulty in measuring third-party benefits
failure to consider the time value of benefits and costs
difficulty of accounting for program interactions
Question 22
In the constant-growth dividend valuation model, the required rate of return on common stock (i.e., cost of equity capital) can be shown to be equal to the sum of the dividend yield plus the ____.
Answer
yield-to-maturity
present value yield
risk-free rate
dividend growth rate
Question 23
Capital expenditures:
Answer
are easily reversible
are forms of operating expenditures
Affect long-run future profitability
Involve only money, not machinery
Question 24
Which of the following would not be classified as a capital expenditure for decision-making purposes?
Answer
purchase of a building
investment in a new milling machine
purchase of 90-day Treasury Bills
investment in a management training program
Question 25
Which of the following should not be counted in a cost-benefit analysis?
Answer
direct benefits and costs
real secondary benefits
technological secondary costs
pecuniary benefits
intangibles